Posts Tagged ‘entrepreneurs’

I believe the single biggest thing that separates companies that grow from those that don’t is the owner’s awareness of the need for change and their willingness to do so.

So, I was interested in a recent post about traits that effective entrepreneurs share. Sure enough, it contained a quote saying that if owners commit to learning more about themselves and becoming the best that they can be, they’ll find that challenges are really opportunities.

But what other traits, according to the post, do effective entrepreneurs have?

1. They’re surrounded by people who share their passion. They need to be because, in our experience, entrepreneurs expect everyone to want to work long hours, get by on a shoestring and to continue to persist in the face of adversity.

We often find that even owners of well-established businesses expect every employee to feel the way they do about the company.

2. They know themselves. The post makes the point that “When you know your strengths and weaknesses, you’re better prepared to build a team that complements you and can help you reach your goals”.

True, but while some of the owners we work with understand their strengths, they don’t – or won’t – admit their weaknesses. While prevailing wisdom may say that’s a bad thing, I’m not so sure.

Some of the personal characteristics that make great leaders – in politics, the military and in business – can also be considered weaknesses. But you can’t have it both ways. You have to deal with one to benefit from the other.

3. They are true experts. Most of the successful business owners we deal with had been working in their industry for some time before going it alone. And they made the break to deal with a gap, shortcoming they saw.

So they are subject matter/industry experts. Unfortunately they often think this expertise extends to all other aspects of building a business.

4. They take action. I totally agree. They are unafraid of risk and willing to make decisions without waiting for perfect information. And that is not the same as being reckless because, in fact, the best entrepreneurs are not.

5. They fail well. Mainly, I think, because they see failure not as something negative, but simply as a step toward success.

There are so many examples. Like Edison and his 900 odd attempts before getting it right. Or Winston Churchill (not an easy person to be around) who said, “Success is stumbling from failure to failure with no loss of enthusiasm.”

A new study reveals entrepreneurs, business owners lack empathy and analytical problem-solving skills.

Is this just telling us what we already know?

Most importantly, from my selfish point of view, how does this affect the way in which they approach strategy?

Apparently, there are 2 reasons why entrepreneurs are below the norm when it comes to analytical problem-solving. They’re motivated by, for example, potential future gains, money and new products or ideas. And they have a sense of urgency when it comes to making decisions.

So they don’t “have time” to collect and analyze data and, because people who tell them their ideas won’t work use numbers to do so, they think numbers just get in the way.

That easily translates into impatience with the strategy development process. Which may be OK in those cases where the business owner’s knowledge of an industry, or a gap in a market, gives them an almost intuitive sense of what to do to win.

However it could explain why some businesses have early successes and then begin to fail. There comes a point where figuring out what the industry, the market, the competitors are doing and the correct sales/marketing and operations/delivery response gets too complex to be done “on the fly”.

And I didn’t even touch on hiring the right skills, acquiring the necessary resources and building a healthy culture, etc. – or how to finance those activities.

Two other skills entrepreneurs lack are self-management and planning and organizing. Reading the post describing the research, the difference between the two blurred a little for me.

A couple of phrases did strike a chord though.

For example, “entrepreneurs typically have many projects underway at one time…. need assistance managing everyday tasks and should… delegate them to someone who has mastered this skill.” The Action Plans, which are developed at annual business planning sessions, play a key part in the successful execution of a strategy.

Making sure they’re completed requires consistent, regular follow up with the Champion. It also requires empathy, which is required to be understanding and supportive when things go wrong and deadlines slip. This helps get the Action Plans back on track.

Will knowing the extent to which entrepreneurs and business owners lack these 4 skills make it easier for those affected to accept solutions?

Based on my 16 years of experience working with business owners and entrepreneurs I’d have to give the typical consultants’ answer – yes and no.

Some individuals – the ones who realize they have to change in order for their companies to grow – get it. And some don’t.

One of the things I dislike about the popular media is the way they create the perception of instant success.

When they write a story about a business or an entrepreneur they focus on what she or he has achieved. The failures that went before the success get much less time than the ultimate, hard won, success – if they’re mentioned at all.

Are the media doing business owners a dis-service? I think so.

Years ago I saw a great quote (I don’t know who said it) – “The only place success comes before work is in the dictionary.”

I’d like to modify it to read, “The dictionary is not the only place failure comes before success.”

Persistence is important. But when everything that could possibly go wrong does, it’s easy to falter. And faltering becomes easier with every setback that occurs.

We need to know when to quit. But that decision must be based on informed judgement and the advice of those we trust. It’s also not a decision to be made immediately after a failure. (Wikipedia says that James Dyson created 5,127 prototypes before developing the vacuum cleaner he thought was perfect.)

When things go wrong our emotions come into play – and they can be influenced by an article/post about an apparent male/female wonder.

So it’s nice to see a piece that helps restore balance.

There was a blog post in January that recorded the 5 biggest mistakes that, in the author’s opinion, Steve Jobs made. I’d either forgotten, or didn’t know, that:

1. Jobs lured John Sculley to become CEO of Apple. Sculley had Jobs fired and almost broke the company.

2. Jobs thought Pixar would be the greatest hardware company ever. Easily overlooked now given Pixar’s huge subsequent success with digitally-animated films like Toy Story.

3. Few Silicon Valley insiders agreed that NeXT computer was a great success when Apple purchased it. The company struggled from the beginning to understand the right customers and markets for its products.

4. The (numerous) products that failed – the Apple Lisa; Macintosh TV; the Apple III; and the Power Mac G4 Cube. The iPod, iPhone and iPad were such great successes that it’s easy to overlook the bombs.

5. Jobs tried to sell Pixar numerous times in the late 1980’s for around $50 million. There were no takers. Just as well. Disney paid $7.4 billion for it in 2006.

There’s no doubt that Steve Jobs was an exceptional man, a visionary. But it’s reassuring to know that he didn’t win every battle he fought. He was human – just like the rest of us!

That will help me the next time I’m having a really bad day. What about you?

Peter Sims, who wrote the blog post, closes by saying that “The antidote is to try a small experiment, one where any potential loss is knowable and affordable.”

Reminds you of the ‘pilot, perfect and scale up’ process we talked about last week doesn’t it?

As an added incentive it was a Q&A with a Harvard professor published in the top magazine for entrepreneurs and business owners. (Call me odd but I think that combination just has to be fascinating.)

So what were the pearls of wisdom? Here are 6 of them.

• Working with corporate types the Prof had always viewed strategy as a set of mechanical tools, a series of frameworks and analysis. But she quickly realized that entrepreneurs are emotionally invested in their strategies – which impact their employees and companies very directly. And business owners feel responsible because, compared to corporations, that impact is felt very quickly.

• Strategy is not only about making your company different – it’s about making it different in a way that matters to your customers. For example, becoming a “one stop shop” is only worthwhile if you know why one stop shopping is important to the people you expect to pay for it. Otherwise, no one will care.

• Entrepreneurs and business owners are more likely to create strategies that reflect their own character. For example, Michael O’Leary the CEO of Ryanair is apparently blunt and in your face. So their bare bones strategy has an aspect of bluntness bordering on rudeness – think of wanting to charge passengers to use the washroom – to it as well.

• Don’t make the mistake of getting into “strategy creep”. That’s Cynthia Montgomery, the Harvard Prof’s, term for businesses that add more services and more technology to reach more customers – and lose sight of what made them different in the first place.

• Business owners should treat their strategies as a living, breathing process that they think about on an ongoing basis. Not as something that is pulled out and dusted off once a year. Why, because what worked last year may not work 3 years from now. The difference a company makes has to be relevant to customers today – and every day.

• A major benefit of seeing strategy as being fluid and dynamic is that it can be adapted as competitors catch up or as customers’ needs change. Montgomery gives the example of Ikea’s constant search for new ways to do things and to save their customers money. She contrasts that with Gucci who lost touch and stopped responding to their market. That required a much more painful – and risky – change to their business model.

I like it when magazines targeted at entrepreneurs deal with topics like strategy. It reinforces the point that every company has to have a strategic plan and a process for keeping it relevant.

This week I had the opportunity to speak to a group of accountants, lawyers and financial planners about how business owners view their companies as an asset for retirement. As it turned out, I couldn’t do the talk because I was sick (hopefully they’ll invite me back).

But here are some of the points I was going to cover.

In our experience getting entrepreneurs to focus on building value in their companies can be difficult. Many assume that they’ll only have to think about selling 6 or 9 months before they retire – ignoring several reasons why a sale may occur well before then.

For example, someone from a larger competitor could walk in one day and make the owner an offer. We see this in industries which are consolidating or when our client has intellectual property, or some other asset, the larger competitor considers to be strategic.

It’s also not unknown for one principal in a partnership to trigger a shotgun clause either in an effort to buy out the others or because he/she is ready to move on.

So, as service providers – consultants, accountants, lawyers, financial planners – it falls on us to make our clients aware of these potential surprises.

It’s purely an observation on our part but younger entrepreneurs appear more focused on the price for which they can ultimately sell their companies. As are those owners who have attracted angel or other investors.

The former want to fund another, more relaxed lifestyle and have a relatively short time frame before cashing out. The latter realize that a liquidity event is a certainty at some point in the not too distant future.

The value of most companies – including those purchased for so called strategic reasons – is a function of the size and continuity of the future stream of operating income they will generate.

To get the best price for the company the seller has to demonstrate, particularly during due diligence, that;

The drivers of great operating profits are in place and that

They will continue to produce those profits after the current owner rides off into the sunset either immediately or after a transition period.

I talked in my earlier post about those drivers falling into 2 categories – the ones the owner can control and the ones he/she can’t.

Many service providers know from training, experience or both what those drivers are. And they share them with their clients, particularly if the accountant, lawyer or other professional believes there’s room for improvement.

But that advice/input may not be taken.

Why? There are 3 reasons.

First, the service provider may not be able to tell their client/the owner how to put the drivers in place. Second, if the owner knew how to put them in place he/she would have done so already. And third, there may not be enough time to get all of them fully implemented.

There is a solution for the first two. Consultants with the relevant knowledge and experience will work with owner to put the missing links in place. We’re certainly not the only firm who can do this but, if you want to know how it would be done, give me a call and I’ll be happy to give you some examples.

But the solution to the third lies solely in the hands of the owners – including younger entrepreneurs (investors tend to take care of their own). It can take as much as 2 or 3 years to prepare/optimize a company for sale. But it needn’t. The things that will bring the best price are the same things that will optimize operating profits this year and next year.

Let’s have a show of hands – everyone who enjoys going to the dentist put your hand up.

I can almost hear the response – “What, are you crazy? What a silly question”. So let’s try another one and let’s make it a multi-part question.

Hands up everyone who enjoys hiring; OR working with; OR even sitting down at a networking lunch next to a consultant.

I’m prepared to wager money (not a statement to be taken lightly when made by a Scotsman) that the response was similar. In fact the only variable in my mind would be how many more people prefer their dentist to a consultant. Why is that?

The answers to that question range along a scale. At one end we have business owners who are not really sure what, if anything, the consultants they hired actually achieved. At the other stand the entrepreneurs who hired consultants to do something – like increase sales or generate more leads – and it didn’t happen.

If we could be objective about the topic we might be able to agree that it’s not always the consultant’s fault when things go wrong. But it is true that we (the consultants) are often holding the gun when it shoots us in the foot. There are a number of reasons why that is the case. Here are 3 of the more common ones.

1. Trying to solve the wrong problem.

Let’s use the example of increasing sales or generating more leads.

When sales drop a common reaction is to assume the problem lies with the sales people. So the solution is to train them in appointment making, presentation and/or closing skills.

The same thing happens when leads begin to dry up. The assumption is that, if we have marketing campaigns, they aren’t working. And if we don’t have marketing campaigns we need some.

The next step for the owner is to start talking to either sales training or marketing consultants.

Let me use a medical analogy to explain what happens next. Let’s say you have a sore shoulder. Your family doctor sends you to see a physiotherapist and a surgeon. Odds are the former will suggest physiotherapy – at least for a start. But the surgeon will probably suggest surgery to quickly solve the problem before it gets worse.

Why does this happen? In 9 cases out of 10 it’s not because the physiotherapist and surgeon are driven simply by wanting to make money. It’s because most of us – for the best possible reasons – are predisposed to see a need for that which we know. And if the symptoms – whether they relate to medicine or business – fit, we react accordingly.

But every now and then the problem isn’t that the sales team’s skills are weak or that our advertising campaigns don’t work. The real problem is that our competitors have introduced more advanced technologies offering more features/greater value. Or it’s that they have adopted innovative processes which have reduced their costs, allowing them to reduce their selling prices.

Sales skills training or introducing creative social media campaigns are simply not an effective response to those problems. And adopting them is the result of faulty analysis – by both the business owner and the consultant.

If you were going to let a surgeon cut your shoulder open the odds are that you would get a second opinion before letting him/her begin. Why would you not do the same with a critical business problem?

I’m reading Larry Bossidy and Ram Charan’s book “Execution – The Discipline of Getting Things Done”. Although I’m only one third of the way through it, I believe it’s the most rational, practical book about strategy that I’ve read in years.

Why do I think that? Well, for a start I buy into their fundamental premises. Here are 5 that I think are particularly important:

1. The difference between a company and its competitors is often the ability to execute.

All business owners have access to the same business books, webinars, training programs, coaches and consultants etc. Why then do 2 companies in the same industry, operating in the same markets and with similar strategies, produce different results?

The only remaining variable is execution. Which doesn’t mean the market leader is executing well – they’re just executing better than the other players. As an old friend used to say – “In the kingdom of the blind the one-eyed man is king”.

Some of you may argue that we haven’t considered culture or leadership. In that case, read on.

2. Execution is the biggest issue facing business today – and nobody has explained it satisfactorily.

Bossidy and Charan make several great points. Over the years, a great deal of thought has been given to strategy development – the result of which has been thousands of books and articles. You can hire a strategy consulting firm (including mine) who will guide you through the various “models”. The same is true – or rapidly becoming true – of leadership development and culture.

But how much thought has been given to how to execute? Not much. (Although, I have to say, our firm has always emphasised it). Perhaps execution has been neglected because it’s traditionally been confused with tactics. But it’s not – execution is integral to strategy.

You could argue that the field of project management is concerned with execution. But is it? Or is it concerned with how to manage the projects that someone else decided have to be executed?

3. Execution is the major job of the business leader. The leader who executes puts in place a culture and processes for executing.

If execution is the biggest issue in business today it had better be the #1 job of every business owner. But there are a couple of bear traps here.

Entrepreneurs have to avoid the temptation to execute or do everything by themselves. They also have to avoid micro-managing or being too hands-on. If the owners don’t do that they lose sight of the forest and only see trees. They stop being strategic and get lost in tactics.

The authors say the most effective approach is “active involvement”. That means getting things done through people. But having such a detailed knowledge of how the business makes money that an owner can constantly probe and ask the right questions – leading people to develop the right solutions.

The owner/leader has to find the correct balance if she is to lead by example and make execution part of the culture.

4. Execution is a discipline, a specific set of behaviours and techniques that, if mastered, will give you a competitive advantage.

The “easy” parts of the statement are that there are specific techniques, they can be mastered and, if you pull that off, you will gain competitive advantage.

The more difficult part is that there are a specific set of behaviours to be mastered also. Human nature being what it is, changing behaviour – even our own – usually takes far more effort than learning a technique. But perhaps that’s where the discipline is required.

5. Execution includes mechanisms for changing assumptions as the environment changes.

This is my personal favourite. Many of the owners and management teams we work with get the intellectual concept of “no fault, no blame” when following up on plans and finding they haven’t worked quite as intended.

But even they find it hard to put guilt and value judgements aside when targets are missed because assumptions were “wrong”. The authors’ stress need for “realism” in running a business. Realistically then, has anyone ever been able to accurately predict the future? Let’s put the fault, guilt, and blame away for good.

In case you hadn’t noticed, I’m excited. There is just so much common sense in this book I’m looking forward to reading the rest of it. I should have read it years ago………but there goes the guilt thing again!

Marie Wiese at Marketing CoPilot wrote in her blog last week that CEO’s begrudge – even hate – spending money on marketing services or marketing consulting. She says that’s because marketing feels like a series of unconnected projects and tasks with vague un-measurable results.

We often encounter similar objections when we meet business owners. Some haven’t worked with strategy consultants and just don’t know what to expect. Even those who have are concerned that they are getting into a situation over which they have no control.

Consulting assignments have a reputation for expanding beyond their original scope and budget. Then there are the results – or apparent lack thereof. Entrepreneurs and business owners who, by nature, want to be in control find this hard to deal with.

But it doesn’t have to be this way. Start by asking for a written proposal which contains the following 5 sections:

1. Our Understanding of the Situation. Look for a detailed description of the situation you now face and the factors which created it. This section should echo your discussions with the consultants – and should be written from their notes of those discussions.

2. Scope of Work. This should contain a step by step explanation of how the consultants will help you deal with the Situation. Ask for the full assignment to be broken into steps and laid out in a table with 3 columns:

A description of exactly what will be done by the consultants in each step.

A clear statement of the deliverable or deliverables for each step.

The resources that both the client and the consultant must provide in order to secure the deliverable(s).

3. Schedule. This section contains the estimated time required to complete each step. The consultant may provide a range of times if they perceive risk, e.g. they have not been able to examine documents being provided by you. Insist, however, that the lowest and highest estimates of the hours required, and the factors which determine them, are clear.

The Schedule should include a proposed start date and may have a target date for completion.

4. Fees and Payment. Preparing the Scope enables the consultant to determine who – e.g. partner, senior consultant, or research associate – will do the work. Completing the Schedule enables a realistic estimate to be made of the time required. Applying the rate for the person doing the work to the hours required to complete it generates the fee for each step. This section should also contain the total cost of the assignment. Ask for it to be broken out by partner etc.

Travel costs – e.g. mileage, air fares – or other expenses should be shown separately. (Note some consultants bill their clients for the time they spend travelling, others do not.)

We always include the statement, at this point, that no additional costs of any type will be incurred without the client’s prior approval.

Usually taxes e.g. HST are excluded from fees.

Make sure the proposal is clear on how and when the consultant is to be paid. In most cases, we send our clients an invoice when we complete a step and request payment on presentation. In this way they are constantly in control of how much they are spending on us.

5. Termination. Insist that you have the right to terminate an assignment at any time. Clarify the financial terms attached to termination before the work begins.

We tell our clients that if, if the deliverable(s) for any step are not completed, they can terminate the project at the end of that step. In that event we simply expect to be paid for the work we have completed.

There is no reason why entrepreneurs and business owners should not be in control when they work with consultants. Getting a clear, specific, written proposal will get you off to a good start. We’ll talk about other ways to stay in control in future posts.

Most consultants just want to deliver results – and we don’t want to be hard to deal with.